Marston’s, the Wolverhampton-based brewer and pubs group, sparked hopes of a turnaround for the embattled sector yesterday.
The company, whose beer brands include Banks’s, said in a trading update ahead of its interim results next month that it had seen a “modest improvement” in trade since its AGM on January 23.
Chief executive Ralph Findlay stressed, however, that it was too soon to call an end to the downturn. Although trends were encouraging, the market remained “fragile”, he said.
“You have the sense that one piece of bad news would make things pretty uneasy again. We’re encouraged, we’re optimistic but we’re not remotely complacent that the worst is behind us.”
Shares in Marston’s rosed by as much as 11 per cent in early trading yesterday before losing ground to close a marginal 0.48 per cent ahead at 157.5p.
Britain’s two biggest pubs operators Punch Taverns and Enterprise Inns, which have lost over 90 per cent of their value over the last year, both rose by as much as 15 per cent as positive sentiment swept across the sector.
They too failed to hold on to early gains with Punch closing five per cent up at 112.5p and Enterprise ending the day 11 per cent up at 126.75p.
Marston’s said like-for-like sales at its 550 managed pubs, which include the Pitcher & Piano chain, were down 1.8 per cent in the 27 weeks to April 13 but had risen by 3.1 percent in the last eight weeks of the period, driven by value-for-money food offers and growth in sales of cask ales.
At its 1,750 tenanted and leased pubs, Marston’s said underlying profit trends had not deteriorated since January and sales volumes in recent weeks had shown an improvement.
Britain’s pubs have been hit by a record number of closures as the industry feels the combined impact of the recession, a ban on smoking, growing competition from supermarkets, and two summers of bad weather.
However, Marston’s update offered some hope that the trading environment could be changing for the better.
“The world has clearly not stopped spinning and the on-trade’s quality operators will continue to outperform,” said Mark Brumby, an analyst at Blue Oar Securities.
Investec analyst Matthew Gerard said Marston’s update had been better than hoped.
“Generally better weather conditions - apart from early February - and less intense discounting from supermarkets should have helped pubs over the last three months.’’ he said.
Charles Stanley analyst James Dawson upgraded his recommendation on Marston’s to “buy” from “add”.
“Given the positive inferences emanating from this update we anticipate a further growth in confidence returning to the stock and sector,” Mr Dawson added.
Mr Findlay said Marston’s will invest between £2 million and £3 million this financial year assisting tenants through rent concessions and discounts.
Market expectations for full-year pre-tax profit currently range between £63 million £75 million, according to a Reuters Estimates poll of 15 analysts.